Transcript

TICKY FULLERTON, PRESENTER: Now for a closer look at today's local markets, I spoke to Martin Lakos from Macquarie Private Wealth a short time ago.

Martin Lakos, was there any impact on the local market share trading as the US election results came through?

MARTIN LAKOS, MACQUARIE PRIVATE WEALTH: Yes, certainly we saw a kick up in the market by about 20 points and it was really pretty much right on our close.

But we'd had a pretty strong market through the day. Interesting Ticky the Dow Jones 300-point rally is the strongest rally that we've seen on a pre-election day in the US for more than 24 years, so that probably answers the questions that markets were a little bit excited about getting the election out of the way, depending on what that result was. And now obviously we know what that result is.

It's really a question whether there's follow through now in the US.

TICKY FULLERTON: It's been a reasonably broad rally here. But what have been the key areas of strength?

MARTIN LAKOS: Well certainly it was a broad rally, but very much the resources were very, very strong. There were some reports out which were unsubstantiated but certainly strong reports out of China announcing a $US732 billion infrastructure spend package over the next two to four years. And that really saw the resources run pretty hard.

To give you an idea, BHP was up 8.5 per cent to $31.60, that's up $2.48. Rio up 8.5 per cent also, or $6.89, that's $86.60 on the close. And gold stocks with a big rally on gold, about $30 overnight. Newcrest up 8 or 9 per cent should I say, or a $1.85 to $22.50.

And we also saw stronger oil price on the US, so Woodside, the oil complex, was much firmer, up about 2.5 per cent.

The banks a bit mixed, although Westpac carried its dividend particularly well. With dividend today 72 cents, it was down 76 cents to $21.54. Commonwealth Bank not fairing as well, it's down 80 cents today to $41.

And then there's a couple of very key specifics: AMP which announced a $400 million placement at a fixed price of $5.30 held its ground fairly well. And ASX reported better than expected trading volumes through the month of October and that stock rallied very strongly as well.

MARTIN LAKOS: Well today we saw just over $6 billion traded. The main reason is we saw AGL's line in Queensland Gas get put through the market. So if you take out the Queensland Gas $1.4 billion worth of trade, we still had about $4.5 - 4.6 billion worth of trade which is not too bad. Basically we've been averaging those sorts of numbers through the past month. So another solid day and good to see the market rising on reasonable volume.

TICKY FULLERTON: But is this just another rally in a bear market?

MARTIN LAKOS: Well it's worth noting that, not that we want to compare this situation completely with the 1929 scenario, but where we had major bear markets we do go through periods where we have bear rallies in bear markets.

To give you an example now, we've had the FTSE, the UK market, rally in the last six days nearly 20 per cent. Wall Street has rallied 16 and we've rallied 14 per cent over those six days.

So they're very strong, quite violent recoveries, giving the market a bit of relief from probably a very oversold situation.

But we'd be expecting to see a number of these types of rallies to take place before we really feel that a bottom in the market has been established.

TICKY FULLERTON: I guess analysts very much still looking at profit downgrades.

MARTIN LAKOS: Yeah, it does look like that's the case. The momentum is still very much on the downside in terms of analysts' consensus forecast.

Don't forget we've got a reporting season coming through next February, those reporting the third of the December profit numbers, and once we have those hard numbers in the market it may well be that analysts have the opportunity to look at the outlook statements by management and also start to revise their numbers in a 2009, 2010 context.

And what's very important for the market, Ticky, in terms of a driver for the market is to really see the bottoming of that earnings downgrade process and in fact to start seeing analysts increasing their earnings outlook.

The market will probably start anticipating that ahead of itself but it's not going to be much before the March quarter, if not the June quarter that we start seeing earnings downgrades, or upgrades, start to take place going forward.